Microsoft to lose royalties for giving away data

Microsoft will be forced to hand over to rivals what the group claims is sensitive and valuable technical information about its Windows operating system for next to no compensation, according to a confidential document.

The group is required to license the technical information to competing groups under the terms of the European Commission's antitrust ruling issued three years ago.

Brussels hopes the order will allow rivals to design server software that runs more smoothly with Windows.

The commission last month accused Microsoft of demand- ing excessive royalties from licences.

Microsoft wants up to 5.95 per cent of companies' server revenues as a licence fee.

But the confidential statement of objections from the commission in the long-running dispute makes clear that Microsoft will at best be allowed to levy a tiny fraction of the royalties it is demanding.

According to calculations by the commission's technical expert, Prof Neil Barrett, Microsoft's demands would mean that rivals could recoup their development costs after seven years.

The commission's expert, who was suggested for the post by Microsoft, goes on to calculate that even an average royalty rate of 1 per cent would be unacceptable for licensees.

Prof Barrett states that a 0 per cent royalty would be "better" and adds: "We can only conclude on this basis that the Microsoft proposed royalties are prohibitively high . . . and should be reduced in line with this analysis."

Three Microsoft rivals that have reviewed the group's pricing scheme extensively - understood to be IBM, Sun and Oracle - come to the same conclusion: "The prices charged by Microsoft are prohibitive and would not allow them to develop products that would be viable from a business perspective," the commission charge sheet says.

A spokesman for the US group said: "Microsoft will respond to the latest statement of objections in full by April 23rd.

"We believe we are in compliance with the March 2004 decision and that the terms on which we have made the protocols available are reasonable and non-discriminatory."

The commission declined to comment.